The following invention relates to a method and system for aggregating and distributing short-sale trading information.
Short selling is a trading strategy often used to profit from an anticipated decline in the price of a stock or commodity. In a short sale, an investor sells borrowed securities hoping to buy back the securities at a lower price and make a profit. For instance, an investor desiring to short-sell 100 shares of XYZ instructs a broker to sell 100 shares of XYZ. The broker then borrows the 100 shares of XYZ stock so that the shares can be delivered to the buyer. The investor then typically tries to “cover” the short sale by buying the same amount of stock that was borrowed for return to the lender. If the investor is able to buy the 100 shares at a lower price than they were previously sold, the investor earns a profit that is the difference between the two prices. If, however, the investor has to pay more for the stock than was received in the previous sale, then the investor incurs a loss equal to the difference between the sale price and purchase price.
It is generally advantageous for investors to know the total number of shares sold short (i.e., short interest) in a particular security. For example, a stock having a large short interest outstanding may indicate that the stock will experience a negative return. In some cases, however, a large short-interest may be a “bullish” signal because it represents a latent demand for the stock that will eventually result in actual purchases of the stock by investors covering their short positions. Thus, an investor will be better equipped to make an investment decision with respect to a particular stock if the investor knows the short interest in the stock.
Short interest information for stocks is traditionally available in limited form to investors from various sources. For example, financial newspapers, such as the Wall Street Journal, print short interest on a monthly basis for stocks on different stock exchanges (e.g., the New York Stock Exchange, NASDAQ and AMEX). The short interest information published typically includes the stocks having the largest short position and the stocks having the greatest change in short position from the previous month. Because the short interest information published in financial newspapers is only updated monthly, such information is not usually sufficiently timely to be of help to a trader in making a trading decision.
Short interest information is also directly published by various stock exchanges. For example, the Hong Kong Stock Exchange publishes on a daily basis the number of shares shorted for a particular stock, the value of the total number of shorted shares and the percent of short sales relative to the total turnover for the particular stock. The Australian Stock Exchange publishes short-sale information in real-time for stocks traded on the exchange.
Although the short information published by the Hong Kong Stock Exchange and the Australian Stock Exchange is more timely than the information that is typically offered in the United States, such information is still of limited value to short-selling investors. First, the information published by these exchanges does not easily help the investor identify short trends in the market. Also lacking is any indication regarding the availability of stock to borrow in order to facilitate a short sale. The exchanges also do not provide short information according to sectors (e.g., technology and healthcare sectors).
Another drawback with respect to the type of short information these exchanges publish is that the information provided may inadvertently disclose a particular investor's short position where that one investor has a large concentration or a disproportionate percentage of the shares shorted for a particular stock. As a result, by reporting the short information for that stock, the exchange may be placing that particular investor at a disadvantage.
Given the above, investors and traders are at a significant disadvantage due to the lack of transactional information on the “sell side” of the market.
Accordingly, it is desirable to provide a system and method for aggregating and distributing short-sale transaction information.